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Cuba, Iran, Russia Pose Trade Challenges

Posted by Kristen Rupert on Feb 19, 2016 12:46:22 PM

Yesterday’s historic announcement that President Obama will visit Cuba signals U.S. intent to further open trade relations with its former nemesis. It’s the latest in a dizzying series of changes to trade relationships not only with Cuba, but also other key nations such as Iran and Russia.

Cuba.jpgCompanies across Massachusetts are expressing interest in Cuba trade.  Equipment manufacturers, health-care service providers, filmmakers and commodities brokers are educating themselves about how they might export to Cuba.

U.S.-Cuba diplomatic ties have improved during the past year, and trade finance rules have changed to allow financing for some approved shipments of goods. A company in Alabama was recently approved to build a plant in Cuba in 2017, in a special economic zone, to assemble tractors.

Travel has become easier than it was even a short time ago.  Massport anticipates that several commercial air carriers at Logan Airport will bid to win non-stop flights between the U.S. and Havana, approved by the U.S. Transportation Department to begin in 2017.

Overarching all this positive news, however, is the fact that the decades-long U.S. trade embargo with Cuba is still in place.  This means trade will continue to be significantly restricted until the U.S. Congress votes to lift the embargo.     

Iran has been subject to economic sanctions for many years because of its nuclear program.  Last month, after Iran proved that it had divested itself of nuclear capabilities, six world powers including the U.S. finalized an agreement to end many Iran trade restrictions.

With 80 million people eager to purchase western goods, Iran offers great potential for trade.  But the U.S. still has significant sanctions in place with Iran because of terrorism and human rights concerns.  Export financing continues to be restricted and American dollar transactions are forbidden.

However, U.S. companies are permitted to trade with Iran if the business is done through a foreign subsidiary.  Despite the limitations on trade resulting from sanctions, several Massachusetts companies, including some in the life-sciences sector, recently received licenses to export to Iran. In fact, Massachusetts exported $8.6 million in products to Iran in 2015, a 67 percent percent increase over 2014. 

Although Russia has long been an attractive market for Massachusetts companies, trade with that country is becoming difficult because of increased restrictions and requirements related to screening, licensing and other export-control issues.

Bay State firms sent more than $130 million worth of exports to Russia in 2015, keeping the country on the list of the top 30 export destinations for Massachusetts products.  However, exports from Massachusetts to Russia are down 25 percent from 2014.

Further complicating the trade picture are ever more complex trade sanctions and issues around identifying end users.  All these have been cited as concerns by Massachusetts firms attempting to do business with Russia.  Also chilling trade is sensitivity over the Russian incursion into Crimea and support for Syria.

What does all this mean for Massachusetts companies?  Experts say tread carefully and seek advice in advance of pursuing trade opportunities with sanctioned countries.

AIM will present a free webinar next Wednesday about navigating the challenging landscape of trade with sanctioned countries.  The presenter will be Gwendolyn Jaramillo, a Partner at Foley Hoag.

Massport is also seeking assistance in determining the level of interest among Massachusetts firms for non-stop air service between Boston and Havana.  If you would like to participate in a brief confidential Massport survey about Cuba travel, contact me at krupert@aimnet.org.

Register for the webinar on Iran, Russia and Cuba

 

Topics: International Trade, Massachusetts economy

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